Cover Page / Letter of transmittal

Abstract on µValuation of Distressed Firms¶

Jointly authored by ± Abhisek Salecha NMIMS University +91-9833886559 Address:- B-404 Chandra Apts, SVP Road, Borivali (W) Mumbai ± 400103 India. Mahesh Hase NMIMS University +91-996821765

The valuation model in focus will be the DCF Method. In this paper. questions have once again started to arise about true valuation of a firm. DCF is the most widely used valuation method. we examine the peculiar characteristics of distressed firms that make valuation so complex. because of its inability to service debt or cover operating expenses. Traditional valuation techniques focus on going on concern approach which leads to overvaluation of distressed firm. we also evaluate ways to incorporate the possibility of distress and default into value. . Considering this problem and other peculiarities. we thus try to make an adjusted valuation model for such firms. like the DCF method determines the value of a company in terms of its future cash flows but in case of a distressed firm the firm may cease to exist and thus all cash flows beyond that point in time are lost. it is intended to value healthy firms. Since many of these companies also have significant debt burdens. Therefore such techniques fall short when used to value firms where there is a significant probability of failure.Valuation of Distressed Firms With the recent crises putting some of the big known companies on the verge of bankruptcy.

Sign up to vote on this title
UsefulNot useful